Question

Problem 2-7 Check my work Refer to Figure 2.3 and look at the Treasury bond maturing in May 2019. a. How much would you have to pay to purchase one of these bonds? (Do not round Intermediate calculations. Round you answer to 3 decimal places.) Price paid b. What is its coupon rate? (Round your answer to 3 decimal places.) Coupon rate c. What is the yield to maturity of the bond? (Do not round intermediate calculations. Round your answer to 3 decimal places) Yield to maturity 1 of 12 ! < Prev Next >

Answer 1

a). Bond's Price = Asked Price Quote * Par Value = 99.8125% * $1000 = $998.125

b). As the t-bonds are semi-annually compounded

Coupon Rate = Semi-annual Coupon Quote * No. of compounding periods in a year
= (0.875% * 2) = 1.750%

c),. YTM = Asked Yield Quote * No. of compounding periods in a year
= (0.933% * 2) = 1.866%

Answer 2

Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 months remaining until maturity. What price would you expect a 6-month-maturity Treasury bill to sell for?